Honors thesis advisor: Dr. Raymond K. Van Ness University at Albany, State University of New York Wai Ping Kan Corporate social responsibility has been very popular amongst companies and top corporations. However the exact definition and the effectiveness of corporate social responsibility is often very vague and confusing to others. This paper will explore in depth of what exactly is corporate social responsibility, how companies are motivated to incorporating CSR into their ideals, business strategies and what actions do these companies take in order to become a socially responsible corporation. Spring 12 Corporate Social Responsibility: A Profitable Alternative
Transcript
08 Fall
H o n o r s t h e s i s a d v i s o r : D r . R a y m o n d K . V a n N e s s
U n i v e r s i t y a t A l b a n y , S t a t e U n i v e r s i t y o f N e w Y o r k
Wai Ping Kan Corporate social responsibility has been very popular amongst companies and top corporations. However the exact definition and the effectiveness of corporate social responsibility is often very vague and confusing to others. This paper will explore in depth of what exactly is corporate social responsibility, how companies are motivated to incorporating CSR into their ideals, business strategies and what actions do these companies take in order to become a socially responsible corporation.
Spring 12
Corporate Social Responsibility: A Profitable Alternative
Wai Ping Kan
Table of Contents
I. Introduction – What is Corporate Social Responsibility? ....................................... 1
II. Motivating Corporations toward becoming Responsible Corporations ......... 3 “What is Assumed to Motivate Senior Managers to Engage in CSR” ................... 9 “What Should Motivate Senior Managers to Engage in CSR” .............................. 10 Implementing and Managing CSR ............................................................................... 11
III. Actions of Socially Responsible Corporations ..................................................... 15 J. Crew Group, Inc. ............................................................................................................ 15 The Estee Lauder Companies Inc. ............................................................................... 20 Johnson & Johnson ........................................................................................................... 25
IV. Summary and Conclusions .......................................................................................... 35
Most importantly the Global Compact focuses on how to create and share ideas of being
socially responsible and overall become a better corporate citizen. The United Nations’
involvement has certainly given it a boost and helped promote corporate social responsibility
among businesses. But organizations like the UN Global Compact do not have any power to
enforce these regulations. They can create guidelines and promote CSR but ultimately it is up to
the businesses to decide whether to comply with the CSR guidelines. Therefore many US
corporations are skeptical of joining the Global Compact network of socially responsible
companies because there is no accountability on whether a business is actually following the
guidelines even when they claim that they are following it. Therefore many suggested for a legal
framework to be developed so that it can be possible to determine whether a company is
adhering to the guidelines.5
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Another international organization that develops and publishes guidelines for social
responsibility is the International Organization for Standardization (ISO). The ISO comprises of
a network of guidelines that is developed by institutes of 162 countries around the world. Public
and privates sectors come together to develop this social responsibility guideline (ISO 26000)
that helps organizations of all sizes around the world to practice corporate social responsibility
strategies. Though there are organizations and guidelines that are created to help manage and
evaluate corporate social responsibility it is extremely difficult for businesses to achieve a certain
level of CSR without working together with the public – both the government and non-profit
organizations. The combined effort and work of all sectors might be able to make a big impact
and help everyone achieve a degree of CSR that is efficient on the ISO 260000 guideline or the
UN Global Compact guideline. There are also many other guidelines and references that scholars
use to measure corporate social responsibility.6
Many organizations also create corporate social responsibility reports where they rank
businesses and corporations based on their CSR performances in multiple dimensions. By
ranking these businesses it may motivate them to perform better and attempt to become even
more socially responsible since no one wants to be at the bottom of the list. The Boston College
Center for Corporate Citizenship and the Reputation Institute has been evaluating and ranking
American companies on their level of corporate social responsibility for the past four years. The
rankings and ratings are based on three factors: 1) citizenship – is the company socially
responsible, 2) governance – transparency and 3) ethical business standards – employee
satisfaction and paid a decent wage, and workplace. For 2011, Publix Super Markets Inc.,
Google, UPS, Kellogg’s, and Amazon.com have been ranked as the top five companies.7
Corporate social responsibility ratings and reports that are compiled yearly by organizations and
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groups is also a motivator for businesses to follow up on their CSR policies. Since these
businesses know that they will be evaluated and monitored at the end of the year they will be
more motivated to follow the guidelines. This would push corporations to put in their best effort
because in a list of top 50 companies for CSR, no company would like to be the last one on the
list or even worse – not be on the list at all.
We will attempt to explore what drives companies to practice business in a socially
responsible way. Some of the possible motives might be pressures and expectations from
external sources such as consumers and society as a whole for business to be socially
responsible. They are also more likely to act responsibly if these standards are widely accepted
and supported by the society – kind of like society’s standards and expectation for all business to
follow it. On top of that community leaders and stakeholders plays an important part in
influencing a company’s decision to act socially responsible. In a study by Babiak and
Trendafilova (2010), (Campbell (2007) pointed out that corporations are more likely to act
socially responsible and follow CSR behaviors if there is strong and well enforced regulation in
place to monitor and guide the company.8
Other possibilities to consider a company’s motive for adopting socially responsible
strategies are that they want to be recognized by the public as a legitimate company. Besides
receiving recognition many companies think that social performance and financial performance
is linked together. If a company is socially responsible then they will also be able to perform well
financially. Since CSR is becoming a trend in the business world many businesses are trying to
catch up and be socially responsible. Not only is it an “expected requirement by society” but also
many are eyeing CSR as an essential component in the company’s portfolio as it will bring a
good reputation and attract more investments and resources for the company. Waddell (2000);
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Waddock and Smith (2000); Vidaver-Cohen and Simcic Brønn (2008) all agreed that most
companies that decides to adopt CSR will focus on activities that highlights their company
strength in the industry and at the same time strengthen their relationship with the local
community including partnership with various non-profit and governmental organizations.9 Then
there is the moral and ethical reason for behaving socially responsible – companies are simply
practicing CSR strategies and incorporating it into their business strategies because they want to
contribute to society.
It is impossible to see immediate results from corporate social responsibility practice
however most businesses knows that CSR practice will help them in the long run. Ditlev-
Simonsen and Midttun (2011) conducted a study and survey with the question of “What
Motivates Managers to Pursue Corporate Responsibility”? They have summed up ten
perspectives that motivate managers to practice CSR.
Figure 2 (What Motivates Managers to Pursue Corporate Responsibility? A Survey among Key Stakeholders)
The most widely believed reason for engaging in CSR is often profit and value maximization in
which companies hopes to improve and increase in profit for both short term and long term.
Then there is stakeholdership – where the company has to satisfy stakeholders and therefore have
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to practice CSR. Cluster building refers to the fact that businesses come together and contribute
to the development of the local area/neighborhood. By forming a cluster of companies and
contributing locally these companies can build a strong network to help each other out. Another
major motivator of CSR engagement is branding and innovation. Many companies focus on
building their brand and creating a good reputation because that is the core in maintaining and
ensuring the well-being of the company in the long run. A company with a strong brand
reputation will have better performance, attract more resources and have a competitive advantage
over other companies. Also companies decide to become involved with CSR practice because
they want to be placed in a new environment where they can come up with new ideas and create
innovative products/services. Also since they are in a new market they will be the first one to test
the water and acquire the necessary skills and knowledge to develop new products.10
Many companies that are trying to achieve corporate social responsibility are also trying
to improve their corporate and brand image. These companies tend to look for ways of
advertisement and promote to customers about their new and improved company image so they
often incorporate cause-related marketing in their CSR practice. Cause-related marketing (CRM)
is a method that companies use to inform consumers about how corporate social responsibility
plays a role in the management and company overall. When a message for a certain cause or
event is promoted to the audience it will influence consumers’ preference and buying decision.
When people think of corporate social responsibility they will almost always associate it
with supporting a charitable cause or donating to charities. There is much more to corporate
social responsibility than donating to charities. In fact corporate social responsibility is a very
complex issue/matter than entails much more than charities. A company can be performing very
well financially and decides to use cause-related marketing to support charitable causes. This
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promotes their corporate image and at the same time they are marketing the product or service
towards their audiences.
Cause related marketing (CRM) is often a method for companies to promote their image
and show consumers their values and commitment to corporate social responsibility. Companies
who are socially responsible tend to perform better than others as they have the consumers’ trust
and support. Also these companies stand out more to consumers because the product/service is
often associated with a social cause or shows the company’s devotion to corporate social
responsibility.11
In order to gain more insight as to what motivates managers to pursue CSR in their
company a panel of corporate leaders, NGO employees and business students in Norway were
surveyed unanimously to collect their opinions on what they think motivates and what should
motivate managers to pursue CSR. 79 surveys were received from the corporate leaders’ panel,
300 surveys were received from the students’ panel and 35 surveys were received from the NGO
panel. Based on the surveys across the 3 panels branding/marketing is assumed to be the most
important for motivating businesses to engage in CSR.
“What is Assumed to Motivate Senior Managers to Engage in CSR”
Based on the surveys from the three panels branding, value maximization,
stakeholdership and profit maximization are ranked as top priority for motivating managers to
engage in CSR. Companies are mostly investing in CSR because they want to build their brand
image and reputation. Many believe that they will benefit in the long run – increase profit and
value for shareholders. Also satisfying the stakeholders and ensuring that they are happy with the
company’s business strategies is very important. Meanwhile cluster-building and innovation are
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ranked somewhere in the middle by all three panels. Ethics/morals were ranked lowest on the
bottom of the list across the three panels. This suggests that many businesses are engaging in
CSR for practical reasons such as profit, branding, innovation instead of thinking about morals
and ethics.
Figure 3 (What Motivates Managers to Pursue Corporate Responsibility? A Survey among Key Stakeholders)
“What Should Motivate Senior Managers to Engage in CSR”
The results for what should motivate managers to engage in CSR are slightly different
from what is assumed to motivate managers in CSR. Previously branding was ranked as the
number assumed motivator that engages managers to practice CSR. Across the three panels
surprisingly sustainability is ranked as the number one motivator that should engage managers.
Another interesting note is that ethics/moral went from the bottom of the list to the top as a high
priority factor that motivates managers. Also profit maximization moved down the list to low
priority.
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Figure 4 (What Motivates Managers to Pursue Corporate Responsibility? A Survey among Key Stakeholders)
Value maximization and stakeholdership has consistently stayed at the top of the list and this
reflects how the three panels value long term value and the satisfaction of stakeholders.
Moreover they know that CSR does not yield immediate results and payoffs. Overall branding
and reputation building is viewed as a high priority motivator for managers to engage in CSR.
Ditlev-Simonsen and Midttun (2011) pointed out the reason for branding to be ranked as a top
motivator is probably due to the “strong brand orientation in western business practice” and how
in the present day – media and communication are so important and are on the rise.12
Implementing and Managing CSR
Most companies do not have the correct tools and skills to management and incorporate
CSR so they often struggle with managing CSR. In order for CSR to be successfully practiced in
a company measurement tools, communication and recognition is needed. Companies often
struggle with communication, as they have to communicate both internally and externally. Most
of the time companies focus on external communication and neglect internal communication
with their own employees.13
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When businesses decide to engage in CSR practices many top management teams should
start with implementing CSR values and ideals within the company first. By focusing internally,
companies are able to change the internal structure of the organization and the corporate identity
overall. When implementing corporate social responsibility policies and values in a company the
employees play a very important role in whether the implementation will be a success or failure.
If the employees does not support or understand the decisions then it will be very difficult to
make any changes even though it is ultimately the top management team who makes the final
decisions. There is a difference between the ideals of CSR and actual practice of CSR. The
company has to coordinate the changes slowly and it is best for the employees to take part in the
discussion.
If a company states that they are socially responsible but fail to first implement CSR
strategies from within the organization then they will be criticized by the public. A reason for fail
might be due to the top-down management system where employees are often given orders to
follow without having a chance to ask questions or voice out their opinions. During the time of
implementation employees might not agree with the values or perhaps have misunderstandings.
When the company is identifying CSR strategies it should be a participative process instead of
top-down system. Only through communication and value feedbacks from the employees then
the company can make progress with corporate social responsibility values within the
organization. Communication helps solve any misunderstandings and ensure efficiency. Without
these two factors it will be difficult and hard to attain high standards of corporate social
responsibility.
To ensure that everyone in a company is on the same page and has the same views of
corporate social responsibility the stakeholders and employees should take part in the CSR
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planning process. By collecting ideas and feedback internally and externally it would be easier to
engage and implement CSR. This will bring in multiple perspectives and concerns, which will
address all aspects of CSR standards. Besides developing CSR strategies it is also difficult for
the company to successfully use CSR strategies along with their business strategies. 14
(Pinney, 2009) developed a Corporate Citizenship Management Framework (CCMF) to
help companies understand more about CSR. There are four domains for managing CSR:
1. Values, Mission, Principles, and Policies: making sure CSR is aligned with the
company’s management structure.
2. Community Support – Addressing Social Challenges: take part in the community by
helping out social issues and supporting them.
3. Operations – Responsible Business Practices: operate your business responsibly.
(Health and safety, sustainable environmental practices, human rights, employees,
etc.)
4. Products and Services – Marketing Strategy: changing products/services and adapting
to societal needs. (I.e. marketing the product to be socially beneficial or eco-
efficient.)15
The Boston College Center for Corporate Citizenship has developed a Corporate Citizenship
Assessment Tool that is based off from the Corporate Citizenship Management Framework
(CCMF) to help companies determine their current state of CSR. This tool is an online platform
where companies will answer 79 questions about their CSR management and practices to figure
out their strengths and weaknesses. The questions developed by BCCCC were based on the four
dimensions of Corporate Citizenship Management Framework. This provides companies with a
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more accurate assessment of where to focus on and what areas need to be managed in order to
engage in CSR successfully.
More than 70 large and small, public, private companies and NGOs have used this
assessment tool to determine their strengths and weaknesses with corporate social responsibility.
While using this assessment tool many managers has come to realize that they need the help of
many departments and employees to complete all the questions. This helps with internal
communication as the manager realizes that employees are a critical part of the company; they
are necessary in ensuring the success of CSR practice. Since this tool provides feedback for
companies it also helps them identify new opportunities to further advance their CSR
engagement. Some of the companies that have used the assessment tool are: Adobe Systems Inc.,
Best Buy Co., Burger King Corp., Intel Corp., Expedia, Exxon Mobil Corp., Wells Fargo,
Verizon Communication and General Mills.16
There are many organizations and assessment tools available to companies to help them
and motivate them towards becoming more socially responsible. More than often companies are
attracted to become socially responsible but they lack the necessary tools and assistance to
practice CSR. Now with so many resources and organizations for CSR, companies can easily
find the right method to assess their level of CSR and strengths and weaknesses to work on.
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III. Actions of Socially Responsible Corporations
There are so many companies that are currently practicing corporate social responsibility.
For some companies their vision and mission statement are centered on practicing business in a
socially responsible way. Then there are other companies whose goal is to become more socially
responsible and more profitable. Every company is different as they have different structures,
cultures and as a result are in different stages of corporate social responsibility. In this part of the
paper we will analyze various companies and their actions of becoming a socially responsible
company. The four components of corporate social responsibility as defined by Carroll (1976)
will be used as the basis to analyze these companies. These four components are economic, legal,
ethical, and discretionary.
J. Crew Group, Inc.
A company that will be analyzed in this paper is J. Crew Group, Inc. as they have been
very successful with their business. The company’s social behaviors, core values and actions will
be analyzed to see how they are working towards becoming more socially responsible in
different aspects. J. Crew’s social responsibility mission statement is:
“We believe that we have a responsibility to operate our business with sensitivity to the
world around us. We seek to incorporate sustainable business practices into all of our
operations, improve our environmental impact and support social responsibility and community
involvement. As part of our long-standing commitment to service, we hope to inspire our
associates, customers and partners to protect the environment and promote social
responsibility.”17
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J. Crew is an American apparel retailer headquartered in New York City that debuted in
1983 with the mailing of its first catalog. After six years since their debut in the clothing retail
industry J. Crew opened a flagship store at New York South Street Seaport. They are a multi-
brand, multi-channel specialty retailer. J. Crew has been selling upscale high-quality clothing to
men, women and children. They use high quality and luxurious material such as cashmere, wool,
leather along with the finest global fabric mills and craftsmen creating classic clothing styles and
accessories with a twist. J. Crew also offers unique, vintage and limited edition item collection
items to its customers. They have also launched other lines such as crewcuts (for children), J.
Crew Weddings & Parties and Italian Cashmere Collection. J. Crew introduced Madewell in
2006, a women’s casual modern day clothing store targeting women ages 18-40. J. Crew is still
continuously expanding its business through retail stores, factory stores, online and catalog
business. Today, there are 248 retail stores – including 9 crewcuts and 20 Madewells stores, 85
factory stores, and 3 clearance stores nationwide. They have also expanded its international e-
commerce in 2011 to include shipping to select international destinations. 18
19
As of January 2011 J. Crew has about 12,700 employees, where 3,800 were full time
employees and 8,900 were part-time employees. Approximate 1,000 employees work at the
customer call center and direct order fulfillment operations facilities. There are 260 employees
who work at the store distribution center. During peak seasons during the holidays approximately
3,200 employees are hired due to store demand. Even though employees are not represented by a
union, J. Crew still has a good relationship with its employees as they have had no labor-related
work stoppages.
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J. Crew offers a comprehensive benefits package with competitive salary, a bonus
potential and a store discount. J. Crew is an Equal Opportunity Employer as they embrace
diversity and this value is reflected through the actions of the company and work environment. J.
Crew states that they are committed to affirmatively providing equal opportunity to all associates
and qualified applicants without regard to race, color, ancestry, national origin, religion, sex,
marital status, age, sexual orientation, gender identity or expression, legally protected physical or
mental disability or any other basis protected under applicable law.20
Currently the average
salary for working at J. Crew full time is $51,000.21
Employees are offered medical, life and
dental insurance along with 25 paid vacation days and a 30% store discount. Starting from 2009
the company has been trying to implement cost reduction plan due to the tough economy – to
reduce workforce by about 95 positions in the New York offices and support functions in the
field and distribution centers (about 10% reduction in staffing for the departments included). The
employees who were affected were offered severance packages along with transition assistance.
Also J. Crew suspended the 401(k) Plan Company matching contributions though the balance of
2009. Thought J. Crew has announced the cost reduction of company workforce there have not
been any labor strikes or uprisings of any sort.22
Customer satisfaction is a top priority for J. Crew as they offer a wide array of services
and promotions specifically for its customers. J. Crew offers perks for its frequent customers
such as exclusive pre-sale and promotions allowing them to get a firsthand look of the new line
for the season. Also they offer personal shopper services to customers so they can seek
professional advice and opinions on J. Crew products. The J. Crew customer service phone line
is available 24 hours a day, seven days a week. A live chat feature is offered on the J. Crew
website if customers are uncomfortable with calling into the customer service line.23
Students
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who shop at J. Crew stores are entitled to a 15% discount by showing a college ID. Price
adjustments can be made on merchandise within 7 days of a purchase if the price of the item
drops due to sales. The company distributes their merchandise through several different sales
channels: retail stores, catalogs and e-commerce so this allows for customers to make purchases
in the most comfortable and convenient way that they prefer.
J. Crew emphasizes that their suppliers must also be socially responsible. Backed in
2000, J. Crew was part of the $20 million dollar settlement for violations of labor laws and
international human rights. The workers of the island of Saipan that is part of the U.S.
Commonwealth of the Northern Marina Islands brought upon a lawsuit on J. Crew and many
retailers for forced labor. They were working 12 hours a day and 7 days a week making less than
$3.05 an hour. J. Crew was required to hire a non-profit organization in Massachusetts to act as
an independent monitor to ensure that the factories in Saipan are being socially responsible.24
J.
Crew established a Responsible Sourcing Program to clearly communicate with their suppliers.
The J. Crew Code of Vendor Conduct is the basis of this Responsibility Sourcing Program. This
Code of Vendor Conduct contains the principles that all suppliers are expected to adhere to. The
Code of Vendor Conduct includes 14 principles that cover child labor, forced labor,
discrimination, harassment and abuse, wage and benefits, hours of work, freedom of association,
health and safety, laws and regulations, customs and security, environmental standards,
subcontracting, transparency and monitoring and compliance.
This company constantly monitors its suppliers to ensure that they are following the
rules. There were about 150 vendors representing about 215 authorized factories in 18 countries
in the fiscal year 2010. J. Crew inspected 80% of the existing authorized companies and 100% of
the new factories.25
In 2004, one of J. Crew’s merchandise – the men’s barn coat was found to
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contain a toxin Teflon which is synthetic material composed of chemicals that contaminate
human blood and can cause polymer fume fever when burnt at relatively low temperatures.26
J.
Crew shortly removed the coat after the discovery of Teflon was found in the men’s barn coat. In
2006 a Chinese textile company, Xinhua that is a supplier of J. Crew was said to have released
over 10 million tons of waste through an underground pipe over the last two years. As a result
Xinhua was fined $1.4 million for the discharge of illegal sewage for the last two years.27
J.
Crew is not using Xinhua as a supplier anymore due to them violating the Code of Vendor
Conduct.
J. Crew has many suppliers outside of the U.S. such as manufacturers in Europe and Asia
so they are subject to the regulations of federal and state agencies such as the U.S. Custom
Service and the U.S. Federal Trade Commission. An example would be that the company
monitors closely on import and export operations that ensure that they are adhering to the
regulations of the U.S Custom Service. The catalogs, labeling and packaging of merchandise
along with advertisement must meet the standards of the Federal Trade Commission. J. Crew has
a good relationship with its suppliers, as there are usually no problems with the import of
merchandise.28
They are also working towards become socially responsible in the environmental aspect
by developing programs in five key areas: energy efficiency, paper/natural resources, waste
minimization, supply chain and engagement. J. Crew aims to become more earth-friendly by
developing and implementing strategies to reduce the effects that their operations have on the
environment. By developing programs and policies to help the environment at the same time J.
Crew also hopes to improve their performance. The three main goals that guides J. Crew’s social
responsibility program are: “reduce, environmental impact of our facilities and products”,
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“improve the environmental performance of our supply chain” and “engage associates,
customers and suppliers in our efforts”. When J. Crew purchases paper for their catalogs they
prefer to use paper that is certified by the Forest Stewardship Council (FSC) to ensure that the
paper comes from responsibly harvested and verified sources. Also shopping bags are made from
100% recycled paper. When sending out packages J. Crew also makes sure that they are
optimizing their packaging to eliminate any unnecessary waste.
J. Crew seems to be fairly socially responsible as they are committed to working towards
the goal of being a responsible company. They had lawsuits and violations before but they are
very transparent with their company information and have a dedicated social responsibility page
on their website. There are many fans of J. Crew who praises the company’s products and
excellent customer service. J. Crew also participates in philanthropic events to help those in need
and fundraise for causes.
The Estee Lauder Companies Inc.
Another company that will be analyzed is The Estee Lauder Companies, Inc. Estee
Lauder is a well-known prestigious cosmetic company that is headquartered in New York City.
Estee Lauder was founded in 1946 by Estee Lauder and her husband Joseph Lauder with four
cosmetics products and has grown to manufacture and market prestigious skincare, makeup,
fragrance and hair care products for men and women. The company’s mission statement is
“Bringing the Best to Everyone We Touch and Being the Best in Everything We Do”. The vision
statement is “The global leader in prestige beauty; a well-diversified, brand-building powerhouse
of unrivaled creativity and innovation”. Currently there are 28 brands that are managed by The
Estee Lauder Companies, Inc. Some of these brands are Bobbi Brown, Bumble and bumble,
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Clinique, Coach, Donna Karen, La Mer, M.A.C, Tom Ford and many others. Estee Lauder
products ranges from entry-level prestige to ultra-premium luxury and are sold in more than 150
countries around the world. The Estee Lauder Companies also has a page dedicated to corporate
social responsibility on their website. The company’s employee relations, customer relations,
government relations, environmental relations, community relations and many other factors that
contribute to corporate social responsibility will be analyzed.
The company has about 32,300 employees operating in 150 countries. Estee Lauder
embraces diversity and takes pride in providing a work environment to people of different races,
sexual orientations, genders, ethnicities, religions and background. The company also empowers
women in the company to be leaders and innovators. There are six women on the Board of
Directors and three of the Executive Officers are women.
Estee Lauder values its employees and believes that they bring unique approaches and
innovative ideas to the company. The success of the company is the result of all the talents,
efforts and passions that employees contributed to and the company values them. The Chairman
Emeritus of the company, Leonard A. Lauder said, “The wealth of a company is its people. By
that standard, we are a very wealthy company”. There are many professional development and
training opportunities available at Estee Lauder for its employees. The company’s education and
development program offers tuition reimbursement, global executive development, executive
training, brand training, sustainability training, workshops and other perks for employees. Estee
Lauder aspires to have a workplace with zero incidents so they have 27 full-time employees to
monitor environmental, health and safety concerns at their manufacturing, distribution and retail
facilities.
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A global based-behavior safety program was introduced in 2010 to promote safe behavior
between employees by encouraging them to positively influence one another through
observation, coaching and communication. The company also allows employees to communicate
effectively and efficiently with each other and the senior leadership team by offering an
enhanced intranet. As a result senior leaders can get direct feedback from employees and keep in
touch despite of being in another country. There is an anonymous Code of Conduct telephone
hotline that allows employees to call in when they complaints regarding discrimination,
harassment or unfair treatment.29
Customer relation is another factor that is greatly valued at Estee Lauder. There are many
channels and ways for offered by Estee Lauder to communicate and promote awareness with its
customers. Estee Lauder is known for the technique of gift-with-purchase offer that has become
a norm in the cosmetics industry. Estee Lauder has 6 global Consumer Care Centers and toll-free
hotlines to assist customers. Also customers are given individualized attention at Estee Lauder
stores. The company’s various channels of distribution: upscale department stores, specialty
retailers, upscale perfumeries and pharmacies, prestige hair salons and spas, freestanding
company stores, direct response TV, stores on cruise ships, in-flight, duty-free shops and the
Internet allow consumers to purchase Estee Lauder brands cosmetics products whenever and
wherever they are. Estee Lauder products are luxuriously priced but consumers are also getting
quality cosmetics, top-notch service along with a prestigious reputation for the brand. They strive
to be a responsible company through eliminating waste and reducing inefficiencies so that
customers can receive the maximum value for the products they purchase. Though they strive for
customer satisfaction there are complaints made by customers stating that they have allergic
reactions to the cosmetics products. Customers found it extremely difficult to return products and
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were even treated terribly. Some customers also reported that the customer service hotline was
not helpful and they were treated rudely.30
31
Since Estee Lauder is a cosmetics company they are subject to the laws and regulations
related to cosmetics and the safety of consumers. There are two laws that are related to cosmetics
and in the U.S. – the Federal Food, Drug and Cosmetics Act and the Fair Packaging and
Labeling Act. Then there is the Food and Drug Administration (FDA) that ensures the safety of
the consumer and the environment. The FDA has been conducting studies on the level of lead
that are in lipsticks. 400 lipsticks brands and companies have been tested and were all found to
contain various levels of lead. Clinique, M.A.C and Estee Lauder lipstick brands have been
tested and determined to contain lead. The level of lead found in these lipsticks are below the
hazardous level, as the FDA does not consider the lead levels found in the lipsticks to be a safety
concern. Though the level of lead in the lipsticks are not a safety concern Estee Lauder will
continuously monitor the FDA regulations for possible changes in the future so that they will be
able to comply with the regulations.32
Estee Lauder tries to minimize its environmental impact by focusing on sustainable
packaging, energy conservation, biodiversity, green chemistry and return/recycle. There is a
Corporate Environmental Affairs and Safety (EAS) Committee that develops and oversees the
company’s environmental policies and strategies. The top priorities of the EAS Committee is to:
recycle and reuse as many resources as possible, conserve water and to reduce contribution to
global climate change by conserving energy and reducing the greenhouse gas emissions
associated with their operations. Meanwhile the Global Environmental Affairs and Safety
Department reviews the company’s safety, health and environmental performance and risks
every year. Some of the company’s achievements are: 6 of Estee Lauder’s suppliers have
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committed to using renewable energy, 100% PCR plastic contents are used in promotional
bottles and Clinique uses 80% recycled aluminum in their skincare caps.33
Besides aiming to improve company performance and becoming more sustainable Estee
Lauder has also been contributing a lot to the community. Estee Lauder is involved with many
philanthropic activities and causes. They have Corporate Charitable Contributions Committee
comprised of senior executives that are focused on funding local and global organizations that
reflects the interests and concerns of their employees, partners and consumers. Estee Lauder’s
largest philanthropic campaigns are The Breast Cancer Awareness Campaign, the M.A.C AIDS
Fund and the AVEDA Earth Fund. The Breast Cancer Awareness Campaign that started in 1992
also created the Pink Ribbon as a symbol for breast health and breast cancer awareness. The
M.A.C AIDS Fund allows M.A.C employees to volunteer and help those affected by HIV/AIDS
throughout the world. Their mission is to help and serve people of all ages, all races and all sexes
affected by HV/AIDS. The AVEDA Earth Fund is committed to earth and community care by
supporting projects that protects communities; preserve natural resources and ecosystems, and
bringing various environmental, economic and social benefits to local communities.34
The type of suppliers that Estee Lauder uses for its cosmetics products plays an important
role in social responsibility. Estee Lauder is committed to sourcing products and services
responsibly as they have high standards for their suppliers. In 2010 they have spent around $1
billion within about 100 countries. They try to purchase from suppliers that close to their
manufacturing plants in order to reduces carbon dioxide emission from transport. Also Estee
Lauder has a Supplier Code of Conduct, which all suppliers must adhere to in addition to the
local regulations. Natural ingredients are used to create many of the Estee Lauder brands
products. The company partners with institutions such as the United Nation and NGOs to
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identify sustainable sources for the creation of their products. The Estee Lauder Global
Operations Department monitors and ensures that the companies are adhering to the necessary
international, national, local standards and regulations. Regular inspections and internal audits
are conducted at the company.35
Johnson & Johnson
Besides analyzing clothing and cosmetics companies we will also look into a
pharmaceuticals company – Johnson & Johnson. Johnson & Johnson the pioneer of medical
devices and products that was founded in 1886 has 126 years of history. They are headquartered
in Brunswick, New Jersey. Originally a medical supplies company Johnson & Johnson has
expanded to three business segments of consumer, pharmaceutical and medical devices and
diagnostics. The company’s products are sold in over 275 countries. There are over 250
subsidiary companies under Johnson & Johnson operating in 60 countries. Some the brands
under Johnson & Johnson are Band-Aid, Neutrogena, Acuvue, Tylenol and many more.
Johnson & Johnson is considered one of the top companies to work at in many countries.
They are the 8th
largest pharmaceuticals company in the world. Currently the company has about
117,900 employees around the world who are working on research and development,
manufacturing and sales. Johnson & Johnson values its employees as they are known for their
high level of commitment and care towards their employees. This can be seen in Johnson &
Johnson’s credo where they show value and responsibility towards their employees. The credo
states:
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“We are responsible to our employees, the men and women who work with us throughout
the world. Everyone must be considered as an individual. We must respect their dignity and
recognize their merit. They must have a sense of security in their jobs. Compensation must be
fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways
to help our employees fulfill their family responsibilities. Employees must feel free to make
suggestions and complaints. There must be equal opportunity for employment, development and
advancement for those qualified. We must provide competent management, and their actions
must be just and ethical”.36
Employees are highly valued by the company as they provided with opportunities to develop and
advance their careers, well-regarded compensation, benefits and employee programs. Johnson &
Johnson has a School of Personal and Professional Development and e-University for employees
to take classes. Training and development are accessible globally and are available at the
individual, team and organizational levels. To ensure the success and growth of employees
Johnson & Johnson provides many opportunities and a unique environment for career
development and performance management. Employees also get to develop a personal
customized development plan and receive personal coaching from senior executives so that they
can learn more about the company and understand how they contribute to the overall success of
the company.37
Johnson & Johnson are committed to bringing diversity to the workplace as they believe
that it is the key success as it would help create innovative ideas, develop talents, gives the
company a diverse insight on health products and needs. Johnson & Johnson has a global office
of Diversity and Inclusion, which includes Equal Opportunity and Work/Life practices. Then
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they also have the Johnson & Johnson Diversity University that provides online resource to
employees to help them understand and value diversity and the benefits of working together.38
The company also has many guidelines such as the Equal Employment Opportunity Policy,
Harassment Policy, Policy on the Employment of Young Persons and Guide for Resolving
Employee Disagreements to assure that their employees are treated fairly and equally.
As a health care company, employees’ health and wellness is very important to Johnson
& Johnson. Employees are given a comprehensive benefits plan – Choices Benefits Program that
allows them to design their own personalized benefits package for themselves and family
members. These benefits includes: medical, dental, vision, tobacco cessation, HealthAccount,
CareAccount, a basic level of life insurance, accident insurance, disability coverage, long-term
care insurance, group legal insurance, auto and home insurance and commuter benefits program.
These benefits are available to employees who are active salaried and also to non-union hourly
employees as well as regular and part-time employees who works 19 hours or more per week
yearly.39
The company believes that by promoting the health and wellness of employees, health
care costs would decrease and productivity and engagement would increase. There is the Healthy
People program that is available globally and provides Employee Assistance, Occupational
Health and Wellness and Health Promotion services. Johnson & Johnson believes that a balance
in the work, home and personal life is very important so they offer employees many
comprehensive programs such as flexible work arrangements, child care, adoption, education and
elder care. Some of the programs offered at Johnson & Johnson are Employee Assistance and
Work/Life Resource & Referral Services, Proactive Health Assessment & Health Counseling,
Workplace Health Programs and Wellness and Fitness Services.40
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Johnson & Johnson has a powerful and strong relationship with its customers as they
have been building their brand for more than a century. The Johnson & Johnson credo also states
their vision and responsibilities towards their customers. It states:
“We believe our first responsibility is to the doctors, nurses and patients, to mothers and
fathers and all others who use our products and services. In meeting their needs everything we
do must be of high quality. We must constantly strive to reduce our costs in order to maintain
reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers
and distributors must have an opportunity to make a fair profit”.41
As a medical company it is very important for Johnson & Johnson to provide high quality
products and services to its customers. Also they understand that they have responsibility to the
doctors, nurses and patients, to mothers and fathers and all others who uses their products and
services. They are dedicated to their customers and want to provide high quality products with a
low cost.
There has been a few recalls for Johnson & Johnson as they believe that the customers
safety at the number one priority. The most well-known recall was the 1982 Tylenol recall due to
seven deaths in Chicago. Several bottles of Tylenol Extra-Strength capsules were tampered and
laced with potassium cyanide that killed seven people. Johnson & Johnson recalled the products
and changed the designs of the product with tamper proof bottles. They also replaced the product
with tablets that were safer for consumers. Instead of withdrawing the brand Johnson & Johnson
worked very hard to win back the trust of customers. They started a coupon campaign that
offered customers with free Tylenol capsules or pills to gain back their confidence.42
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In 2008 Johnson & Johnson-Merck Consumer Pharmaceuticals Company voluntarily
recalled about 12,000 units of 1 ounce bottles Infant’s Mylicon® Gas Relief Dye Free Drops that
was distributed across the country. It was discovered that they might be metal fragments inside
the bottles however the potential for harm was low. The company decided to issue a recall for all
of the 12,000 units of products right away, as they are more concerned about the safety of their
customers.43
In 2010 Johnson & Johnson received a federal warning letter for mishandling quality
control problems with Tylenol. There were consumer complaints of Tylenol Arthritis Relief
Caplets that had moldy odors. The company failed to respond and thoroughly investigate the
complaints. In 2008 consumers complaint about having temporary digestive problems after
taking the product however Johnson & Johnson failed to conduct determine the cause of the
musty smell. Johnson & Johnson responded by issuing a recall of Tylenol arthritis products
along with more than 500 product lots of Tylenol, Benadryl, Rolaids, St. Joseph’s Aspirin,
Motrin and Simply Sleep. The cause for the musty smell of pills was due to the breakdown of a
preservative from the company plant in Puerto Rico. This preservative was used to treat wooden
transport pallets and had leached into the products. Though the company has stumbled they have
decided to change the ways it reviews consumer complaints so that they can identify the
problems quicker and solve it. In addition the company announced that all products in the future
would have to be preservative-free so that this kind of situation would not happen again.44
Johnson & Johnson has a set of Global labor and Employment Guidelines that clearly
states their expectations and policies. This is to ensure that Johnson & Johnson companies
around the world are following environmental, labor and employment regulations and laws
relative to the country that the company is located in. The company has to adhere to any
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regulations and laws set by the U.S. and other countries that they operate in. An example would
be the regulations of the Food and Drug Administration (FDA) in the U.S.45
The company has a Johnson & Johnson Political Action Committee (JJPAC) that helps
fund men and women who are interested in serving the public by seeking elected office. The
company supports those who understand the importance of medical innovations and the health
industry. The Political Action Committee is funded by voluntary employee contributions. This
offers eligible employees to volunteer and voice out their views on issues related to the health
industry and also helps shape public policies.46
Johnson & Johnson is a supporter of sustainable sourcing of palm oil. Palm oil and other
ingredients from palm oil are widely used in personal care products such as lotions, shampoos
and soaps. The wide usage threatened the environments of endangered species and damaged
many rainforests. In 2006 the company decided to join the Roundtable for Sustainable Palm Oil
(RSPO) will allowed them to source all palm oil and palm oil derivatives from certified
sustainable sources.47
The company has also received numerous awards and recognitions around the world for
its contribution and efforts to the environment. The U.S. Environmental Protection Agency
(EPA) has listed Johnson & Johnson as a Performance Track Corporate Leader for showing their
superior commitment to the environment on the corporate level. Then in 2006 the EPA awarded
Johnson & Johnson the Climate Protection Award for their commitment to use cleaner sources of
energy and to reduce greenhouse gas emissions. In 2009 they were ranked number 3 out of 500
for the first Newsweek’s Green Ranking List. Besides being recognized for their commitment in
the U.S. Johnson & Johnson were also recognized internationally.
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Johnson & Johnson have also received numerous award and recognitions abroad. In
Brazil they were named as one of the best ISO 14001 certified companies. Groundwork UK, a
federation of the local environmental trusts in England, Wales and Northern Ireland recognized a
Johnson & Johnson facility in Leeds, United Kingdom with two awards. These two awards were
given for the facility’s waste minimization projects and excellence in environmental
management. Then in Shanghai Johnson & Johnson was recognized by the Shanghai Economics
Committee, Shanghai Construction Committee and Water Shanghai Administration as the
Shanghai Best Performer Water Conservation Corporation.48
In 2006 the company has created Healthy Planet 2010 Goals where they hope to reduce
waste and protect the environment. These goals are based off the company’s credo, which states
that they must “maintain in good order the property we are privileged to use, protecting the
environment and natural resources”.49
Some of the company’s goals are:
To be transparent in that the company can provide environmental sustainability
information to the public.
Reduce carbon dioxide emissions by 7%.
Reduce water usage.
Absolute reduction of hazardous and non-hazardous waste.
Eliminate PVC in primary, secondary and tertiary packaging in the Consumer sector.
Increase employee awareness and understanding of global environmental issues. 50
Johnson & Johnson’s credo also mentioned the responsibility that they have to the
community. In their credo they stated: “We are responsible to the communities in which we live
and work to the world community as well. We must be good citizens – support good works and
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charities and bear our fair share of taxes. We must encourage civic improvements and better
health and education”.51
Johnson & Johnson are dedicated to helping people by making their
lives better and healthier. In 2010 the company has contributed more than $603.3 million in cash
and products to over 700 programs in more than 53 countries. When the Sichuan earthquake
happened Johnson & Johnson collaborated with China’s Ministry of Health and Huaxi Hospital
Mental Health Center to provide help to the children who are recovering from the earthquake.
Also they had another collaboration with the Chinese Ministry of Health and the American
Academy of Pediatrics creating the China’s Neonatal Resuscitation Program that helped saved
the lives of many children. Some of other Johnson & Johnson’s initiatives and collaborations are:
the support of doctors, nurses and local leaders by partnering with organizations to provide
training in countries such as Vietnam, the Children Free From Worms Program by donating
medicines and the INMED Healthy Children, Healthy Future program that promotes healthy
growth and development.52
On their credo Johnson & Johnson stated their final responsibility as to their
stockholders. In the credo they stated,
“Our final responsibility is to our stockholders. Business must make a sound profit. We
must experiment with new ideas. Research must be carried on, innovative programs developed
and mistakes paid for. New equipment must be purchased, new facilities provided and new
products launched. Reserves must be created to provide for adverse times. When we operate
according to these principles, the stockholders should realize a fair return”.53
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Johnson & Johnson believes that when they operate accordingly stockholders will be satisfied
and will receive a fair share of return. The company has been founded in 1886 and was listed on
the New York Stock Exchange since 1944. They had 28 consecutive years of adjusted earnings
increases and 49 consecutive years of dividend increases. Lastly over the last 10 years Johnson &
Johnson’s stocks have generated a 3.6% total return which is higher than the average of 2.9%
total return for S&P 500.54
Johnson & Johnson has a relationship that is based on trust and respect with its suppliers.
The company relies on thousands of suppliers who provide raw materials, services and goods
that is needed to manufacture products, serve its customers and their offices and facilities. Their
credo sums up their view on suppliers: “to obtain the highest quality products and services at a
cost that represents the best possible value, while maintaining the highest ethical standards, and
taking our social and environmental responsibilities seriously”.55
Johnson & Johnson are looking
for high quality products and services for the best possible value but they are not going to
forsake value for social and environmental responsibilities.
In Johnson & Johnson’s Suppliers Responsibility Standards Report they clearly outlined
their expectations and the belief that a good relationship is based on trust, mutual respect and
common values. Suppliers are expected to:
Comply with applicable legal requirements,
Behave ethically and with integrity,
Integrate quality into business processes,
Respect human and employment rights,
Promote the safety, health and well-being of employees
Embrace sustainability and operate in an environmentally responsible manner,
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Implement management systems to maintain business continuity, performance
governance, and continuous improvement, and
Disclose information associated with the supplier’s impact on the environment and social
issues.56
These standards and requirements are the basis for Johnson & Johnson selecting and choosing
their suppliers. Besides targeting big suppliers the company also tries to collaborate with smaller
suppliers to create a more diverse environment. Johnson & Johnson created a Suppliers Diversity
Program in 1998 that gives small businesses the opportunity to work with Johnson & Johnson.
Some of these small businesses are:
Certified minority-owned businesses, small and large
Certified woman-owned businesses, small and large
Certified Gay/Lesbian-owned businesses, small and large
Certified small disadvantaged businesses
Small veteran-owned and service disabled veteran-owned businesses
Small, certified HUBZone businesses57
Ever since the creation of the program in 1998 Johnson & Johnson has spent almost one billion
dollars with small businesses and diverse-owned suppliers. So the company is really trying to
diversify its list of suppliers and give as many opportunities as possible.
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IV. Summary and Conclusion
Three companies have been analyzed for their actions of being socially responsible: J.
Crew Group, Inc., The Estee Lauder Companies Inc. and Johnson & Johnson. These companies
all have web pages and reports dedicated to social responsibility concerning employee rights,
suppliers’ standards, environmentally sustainable, etc. Based on Carroll (1979)’s definition of
corporate social responsibility – there are four components (economic, legal, ethical, and
discretionary) and these companies satisfies the definition of becoming more socially
responsible. Each of these companies is working towards becoming more socially responsible as
they face various struggles and problems. It seems like for these companies the legal and ethical
components are slightly more difficult to satisfy as they have had problems with it. Though they
are following the laws and have guidelines and policies to ensure that workers and even
customers are being treated fairly and they are violating any human rights/labor regulations
sometimes it does not work out.
It is very difficult to achieve high standards in all factors of being socially responsible.
These companies might succeed in one factor of being socially responsible such as
environmentally responsible yet lack in the area of being responsible to its employees. For
example J. Crew Group, Inc. was involved in a lawsuit in Saipan for forced labor where workers
worked 12 hours a day for 7 days a week. Then The Estee Lauder Companies, Inc. customers
complained about the difficulty to return products and that employee are rude. Lastly Johnson &
Johnson were faced with many recalls of their products. This shows that assessment tools and
frameworks such as the Corporate Citizenship Management Framework (CCMF) are needed to
help companies assess their own level of corporate social responsibility. Only by assessing the
company and finding the strengths and weaknesses then they will know where to focus on and
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can work on improving each areas of social responsibility. As mentioned previously,
organizations such as the UN Global Compact and assessments tools along with rankings are
important in motivating companies to become successful in all areas of CSR.
Also some other motivators of CSR for companies are branding, sustainability, value
maximization, stakeholdership and innovation. We can see that J. Crew, Estee Lauder and
Johnson & Johnson are all working towards becoming socially responsible through becoming
more sustainable, treating its employees and suppliers fairly, adhering to regulations and laws,
etc. As they work on improving and achieving responsibility in all these factors of CSR these
companies are building their brand, creating innovative products, becoming more sustainable and
become more financially stable. If carried out correctly corporate social responsibility should go
hand in hand with the company’s performance and well-being. It is profitable for companies to
implement corporate social responsibility strategies as it will only help their businesses.
Although it is difficult to receive high ratings in all areas of corporate social responsibility but
many companies are working towards becoming more and more responsible as they are
motivated. J. Crew, Estee Lauder and Johnson & Johnson are all preparing for the future by
focus on corporate social responsibility as it a profitable alternative. It is the way to become
stronger and survive amongst competitors, as they know that corporate social responsibility will
make a big difference and help the company survive in the tough economy.
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Notes
1 http://www.mckinseyquarterly.com/The_UNs_role_in_corporate_social_responsibility_1499 2 A three-dimensional conceptual model of corporate social performance. 3 www.bccorporatecitizenship.org 4 Managing Corporate Citizenship: A New Tool for Companies 5 http://www.unglobalcompact.org/aboutthegc/thetenprinciples/index.html 6 CSR and Environmental Responsibility: Motives and Pressures to Adopt Green Management
Practices 7 http://www.bcccc.net/pdf/CSRIReport2011.pdf 8 CSR and Environmental Responsibility: Motives and Pressures to Adopt Green Management
Practices 9 CSR and Environmental Responsibility: Motives and Pressures to Adopt Green Management
Practices 10 What Motivates Managers to Pursue Corporate Responsibility? A Survey among Key
Stakeholders 11 A Strategy to Communicate Corporate Social Responsibility: Cause Related Marketing and its
Dark Side 12 What Motivates Managers to Pursue Corporate Responsibility? A Survey among Key
Stakeholders 13 Managing Corporate Citizenship: A New Tool for Companies 14 Collective Ideals and Practices in Sustainable Development: Managing Corporate Identity 15 Framework for the future: Understanding and managing corporate citizenship from a business
